“The volatility of the S&P 500 Utilities index is modestly higher now than its average. But the key point is not so much that Utilities have become more volatile. It’s that sectors that were more volatile (such as, most notably, Financials) have converged to become much less so—and the rankings-based methodology of the S&P 500 Low Volatility Index will home in on the lowest volatility,” said S&P Dow Jones Indices.
Ebbing volatility has helped financial services take the top spot in SPLV with a weight of 35.6%, nearly 1,500 basis points ahead of consumer staples. In fact, six of SPLV’s top 10 holdings are financials, but none are utilities names.
PowerShares S&P 500 Low Volatility Portfolio
Graph Courtesy: PowerShares